This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Interest Rate Effects on Output: Evidence from a GDP Forecasting Model for South Africa

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Aron, Janine
Muellbauer, John

Additional information is available for the following registered author(s):

Abstract

Forecasting models for output are presented to throw light on monetary transmission. Recent research finds multistep forecasting superior to recursive forecasting from a VAR model when structural breaks are present; there are important political and policy regime breaks in South Africa. The equilibrium correction models have a four-quarter ahead forecast horizon, appropriate for measuring interest rate effects. A stochastic trend measures underlying shifts in productivity and other supply side trends. The inclusion of important monetary policy regime shifts, which altered the output response to interest rates, and the control for other structural changes (e.g. trade liberalization), address the Lucas critique in forecasting output growth. There are important and persistent effects of high real interest rates, which significantly constrained growth in the 1990s, and significant potential growth benefits from fiscal discipline. South African growth appears to have become more responsive to the exchange rate with increasing trade openness in the 1990s.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/pubs/dps/DP3595.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3595.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:cpr:ceprdp:3595

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: growth monetary policy transmission multi-step forecasting structural breaks

Other versions of this item:

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Weiss, Andrew A., 1991. "Multi-step estimation and forecasting in dynamic models," Journal of Econometrics, Elsevier, vol. 48(1-2), pages 135-149. [Downloadable!] (restricted)
  2. Forni, Mario & Reichlin, Lucrezia, 1998. "Let's Get Real: A Factor Analytical Approach to Disaggregated Business Cycle Dynamics," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 453-73, July. [Downloadable!] (restricted)
  3. Taylor, John B, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall. [Downloadable!] (restricted)
    Other versions:
  4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  5. Ben S. Bernanke, 1990. "On the predictive power of interest rates and interest rate spreads," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 51-68.
    Other versions:
  6. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-42, December.
  7. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  8. Mark Gertler & Cara S. Lown, 2000. "The Information in the High Yield Bond Spread for the Business Cycle: Evidence and Some Implications," NBER Working Papers 7549, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Oriana Bandiera & Gerard Caprio & Patrick Honohan & Fabio Schiantarelli, 2000. "Does Financial Reform Raise or Reduce Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 239-263, May. [Downloadable!] (restricted)
    Other versions:
  10. Hendry, David F & Mizon, Grayham E, 2000. "Reformulating Empirical Macroeconomic Modelling," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 138-59, Winter.
  11. Muellbauer, John N J, 1996. "Income Persistence and Macro-Policy Feedbacks in the U.S," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 703-33, November.
  12. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October. [Downloadable!] (restricted)
    Other versions:
  13. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April. [Downloadable!] (restricted)
  14. Lucio Sarno & Mark P. Taylor, . "Real Interest Rates, Liquidity Constraints and Financial Deregulation: Private Consumption Behaviour in the UK," Economics and Finance Discussion Papers 97-12, Economics and Finance Section, School of Social Sciences, Brunel University.
    Other versions:
  15. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  16. Bayoumi, Tamim A, 1993. "Financial Deregulation and Consumption in the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 536-39, August. [Downloadable!] (restricted)
  17. Tkacz, Greg, 2001. "Neural network forecasting of Canadian GDP growth," International Journal of Forecasting, Elsevier, vol. 17(1), pages 57-69. [Downloadable!] (restricted)
  18. Gunnar Jonsson, 1999. "Inflation, Money Demand, and Purchasing Power Parity in South Africa," IMF Working Papers 99/122, International Monetary Fund.
  19. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February. [Downloadable!] (restricted)
    Other versions:
  20. Kevin D. Hoover & Stephen J. Perez, . "Data Mining Reconsidered: Encompassing And The General-To-Specific Approach To Specification Search," Department of Economics 97-27, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  21. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
  22. Aron, J. & Elbadawi, I. & Kahn, B., 1998. "Determinants of the Real Exchange Rate in South Africa," Working Papers Series 98-16, Centre for the Study of African Economies, University of Oxford.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guillaume Chevillon, 2004. "A Comparison of Multi-step GDP Forecasts for South Africa," Documents de Travail de l'OFCE 2004-13, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
    Other versions:
  2. Guillaume Chevillon, 2006. "Multi-step Forecasting in Unstable Economies: Robustness Issues in the Presence of Location Shifts," Economics Series Working Papers 257, University of Oxford, Department of Economics. [Downloadable!]
  3. Guillaume Chevillon, 2005. "Direct multi-step estimation and forecasting," Documents de Travail de l'OFCE 2005-10, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
    Other versions:
  4. Janine Aron & John Muellbauer & Coen Pretorius, 2004. "A Framework for Forecasting the Components of the Consumer Price," Development and Comp Systems 0409054, EconWPA. [Downloadable!]
  5. Hildegunn Ekroll Stokke & Jørn Rattsø, 2004. "Ramsey model of barriers to growth and skill-biased income distribution in South Africa," Working Paper Series 4604, Department of Economics, Norwegian University of Science and Technology, revised 07 Feb 2005. [Downloadable!]
  6. Aron, Janine & Muellbauer, John, 2006. "Review of Monetary Policy in South Africa: 1994-2004," CEPR Discussion Papers 5831, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Salinas, Gonzalo & Aksoy, Ataman, 2006. "Growth before and after trade liberalization," Policy Research Working Paper Series 4062, The World Bank. [Downloadable!]
  8. Torfinn Harding & Jørn Rattsø, 2005. "The Barrier Model of Productivity Growth: South Africa," Working Paper Series 4805, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
    Other versions:
  9. Janine Aron & John Muellbauer, 2004. "Construction of CPIX Data for Forecasting and Modelling in South Africa," Development and Comp Systems 0409056, EconWPA. [Downloadable!]
    Other versions:
  10. Christopher Bowdler, 2004. "Openness and the output-inflation tradeoff," Money Macro and Finance (MMF) Research Group Conference 2003 7, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  11. Janine Aron & John Muellbauer & Benjamin Smit, 2004. "A Structural Model of the Inflation Process in South Africa," Development and Comp Systems 0409055, EconWPA. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can use IDEAS to provide links to papers and articles in your course syllabus.

This page was last updated on 2008-9-15.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.